Pete Haskopoulos: AI, Risk & Building Petra Funds Group

When something goes wrong at 6 p.m. on a Friday and private equity, that's when things go wrong. Who do you want to call as a partner and who's going to answer the call and then which group can assemble to help you? And that's really who you're going to have to fight these battles with. Welcome Fun Fanatics. As always, we have the very best episode in store for you. This is the third part in our three-part series on leaders and builders in the fun to have in space. For this special episode, we welcome Pete Haskopoulos, co-founder and managing partner of the Petra Funds Group. Prior to forming Petra, Pete was the CFO of Riverstone. Pete has also worked at the Car-Low Group, Thompson Reuters and before that Ernest and Young. Petra, even though it's just a little over four years old, is already working with 1200+ funds as over 350 employees and 500 billion assets under administration. Pete, like our dear friend Haley, is also a proud graduate of Rutgers University. The opinions and materials contained herein do not necessarily reflect the opinions and beliefs of our employer. Welcome Pete. Welcome to Fun Fanatics. Thanks Jeff. It's been great watching you guys, growth fund fanatics for so long and we're really excited to be a part of it. I want to start with where we left off. We had our friend on Ben Jamron. He's the head of Fund Admin for the Americas for IQ EQ and the question that he left for you is this. What are the things that you're doing to evolve and not be a dinosaur? I'm assuming it's a technology question and evolve from a technology perspective. I think it's interesting because it's more important now than ever because now we're in a situation in a time where if you don't do something and evolve, where 10 years ago you would have evolved, you would have turned to a dinosaur over X amount of time and now it's a lot faster. I think the answer is pretty obvious. It's AI and personally AI, I think, is where I spend all my time to avoid becoming a dinosaur and it's not just AI, it's understanding AI, it's understanding which tools to use and which language models are best to use and also spending a lot of time with prompt engineering, understanding exactly what to ask of the AI. We basically have an AI bot on the team with us and we don't use AI to replace people but it's become a tool that we use to enable our people to really hit 100% accuracy. The other part of it is the building blocks for the future. I think accounting is right for AI takeover and at some point the general ledger will become the blockchain and we'll be able to merge those two worlds. So we're spending a lot of time putting that infrastructure in place. Pete, you mentioned building blocks for the future. Let's take you back to the past real quick. So let's go back to when you started Petra. Specifically, when you and I met you were at Riverstone, you got your direct deposit, you have your benefits, you have the probably what you describe as your cushy gig, right? Comfort in life. And then sort of mid-career, you decide, I'm going to go start my own fun advent business. Take us through your thought process on your first days getting started at Petra. Yeah, absolutely. I think cushy is probably a strong word for any of these types of jobs as a CFO, but for sure it was cushy relatively speaking and there is a real addiction to direct deposit and already we wanted a strong sediction is out there. So once you get past that major hurdle and you're able to step away from that, you also have that mid-career risk move. It was a little bit easier for me though because being a user of the service in the industry, my co-founder Steve Coats and I always had the same view on the industry. We worked about about 15 years before we started Petra. We always saw the industry as evolving in a certain direction and then we also saw a private equity evolving in a different direction and that gap was getting bigger, not tighter. So we really felt like it really made a lot of sense to build a service company that services private equity differently. Private equity was way more complex than it ever was. LPAs were three, four times longer, side letters were not just one or two per fund, but the matrix alone was 300 pages and some funds. Within a few months of starting Petra, we brought two more partners on that were very similar and the four of us together really set out to go after what we thought was this real gap in the market and come up with a company that can do the outsourcing, the co-sourcing, this flexible approach to servicing with very experienced hires out of GPs that have had the reps and have gone through the multiple year ends before their deployed to do work. And a software stack that was very thoughtful, that was built on the best software technology and then we spent a lot of time not custom making our own software, but customizing the solutions around the core software and we were able to take the best workload to capture everything and then digitize it. So we were able to really say this is what the industry needs to really be able to capture all of the work that's get done, minimize the risk and effectively do the work correctly. But there's also another part of this and I appreciate that this sounds like a very nerdy comment to make, but it really is true to the core where we wanted to make an environment where the best accountants can go be the best that they could be and when you hire good people they attract good people and that's the environment that we created here. Be all that you can be, we're not going to take that away from the army, but I do want to hone in on this what we call addiction to direct deposit because that really stood out to me and never really heard anybody describe it that way and I want to pinpoint whether it's an action item or a mindset. If you're somebody that's wanting to whether it's start a fund admin or that say you're a principal at Blackstone and you're thinking about starting your own private equity firm, what's the number one thing to do to sort of break that addiction? The addiction really comes from an insecurity of not having enough and unfortunately accountants account money for a living account numbers. It's really hard for that person to not just always think about that part of it, but not necessarily risk tickers. You start to think about what do you really need and what do you really have and then what can you really do as a business and really you want the equation to be your desire to grow the business and solve the issue that you think is out there is way greater than the pain you think you'll have from this lack of direct deposit and it has to be like not close like way convincing and that's exactly how we felt. Starting a business, it reminds me of Mike Tyson's classic line, everyone has a plan until they get punched in the mouth. Moving on from kind of like what Petra was like in its early days, I think one of the things that stood out to me that makes you guys different especially with your background is that you started as a CFO. How does that sort of mindset and philosophy flow through to your business and how would you say that sort of compares? It's an every part of the business so all four partners at Petra came from the industry and had senior roles at GPs with GCs or CFO roles and it's in every detail from how the proposal goes out to how the responses are handled to how we coordinate. It's in every piece of the workflow. It's in every piece of the business because it really is how we think it should be done correctly and how the industry that just has evolved and grown quickly. How is always that guy of we can just build this in house there's no one that can services like we could and there's a group of people like me that are out there today and have always been out there and I think it's that group that really has a high level of expectations that are very difficult to meet because there's probably pressure internally and pressure in that environment that they're working in that you have to hit and as a result you have to build something that's extraordinary not necessarily available and we think about that and we're like well how do we service the most difficult GP or CFO and that's really where you have to start from and then everything else should fall into place and you have to be able to set an environment up where they can comfortably feel like they day to day are being serviced and you set up a process alongside with them. This is not out of the box. This is a customized solution. So we spend a lot of time I say more time on a whiteboard going through the steps and thinking about how to really solve problems. We definitely do not have a let's go to the game and go to the bar type sales approach and there's some days where I wish it was our style that is not our style. Our style is more let's sit down and really think about what are the challenges what are the goals where would you want to be in six months a year or two years and what are the steps that you're putting in place currently what could we do to get you there comfortably and with minimal risk and disruption to the business and that does create a lot of I would say day to day differences in how you'd work with other groups relatively speaking. Let's go back to the whiteboard when you're talking about strategy whether it's growing the business or using a certain technology or hosting an event maybe you're not taking them to a ballgame maybe it's something else have you made a mistake along the way where you and your partners look back and you could say to someone if you're giving them advice like we we charted this path we went on this path here's a mistake we made and here's how we learned from it move forward. I love the saying no I think there's probably no business and you guys have grown a successful business and you know that it's not realistic to say that you've never come across an obstacle but I would say it's biggest mistake that we made that was something that we were like we should have had more confidence in ourselves was probably we underestimated demand a front if you look at our first orcath which we sometimes pull out like our first version one it was such a modest forecast and we thought that this is what it's going to be for year one and we surpassed that materially and I think that's just because the industry needed something that was more of a high-touch business as service to to be able to provide I think that infrastructure that you need to build for a certain size business versus a larger business has a material difference and I think that's something that we came across and we had to not just focus on high quality accounting but then infrastructure business building and that's it that's something that we had to say pivot but I'd say probably adjust and reset just to make sure that we can set the right platform up for the business to grow from there let's pivot and adjust to the demand that you mentioned I pulled up some stats here 92% of limited partners say that they prefer their GPs to work with the fund admins so as the private markets grow so will the demand and the opportunity set for the fund admins out there whether you're choosing petra or choosing another fund admin CFOs run their process and they're kind of getting pitched in our view the same thing oh we have the best service we have the best technology here's our price let's go how should people think about in a crowded marketplace whether it's choosing petra or someone else who they should go with you can't blame the other firms for having good marketing and you can't get lost in the marketing there really has to be thought that goes into a such a large decision because what you're picking is a partner, not a vendor, and it's important to distinguish the two. I would say that you have to look past the marketing and these larger firms have a list that's public and you can go ahead to any database, whether it be pre-quin or whether it be pitch book and get a list and just call up, it's a smaller industry relatively speaking, so you can go out and get some names of people you may know and you'll be able to call them up and say, "Hey, what is life really like?" Also, you should really look at the team. A lot of times you're getting a showcase or an example team and that team looks great and that's because that team has had 300 reps doing that same pitch. That's not really your team, though. Who's the live team and then are they junior and they still learning? Are they learning on your account? Or have they had many year ends into their belt where they're like, "Just the right person to say, "Hey, if I've seen it before, if I haven't, somebody on this team has seen it." We know how to handle it. That experience professional is a different type than someone else that's younger and inexperienced. I think also technology wise, you need to understand technology in a pitch is really just a perfect environment and almost like that perfect apple that gets sliced perfectly for an infomercial. There's this element of asking a question of what technology do you have, but it's, "Who is on this technology of all your clients? How many have successfully had it implemented? How long has it taken? How many people are still in implementation phase a year later?" Maybe from there, pick some names and then make those your references as opposed to just being given references. I think what you're really doing there is really bringing, "Hey, these are the people you can talk to. This is the experience firsthand on what it's really like." When something goes wrong at 6 p.m. Who do you want to call as a partner and who's going to answer the call and which group can assemble to help you? That's really who you're going to have to fight these battles with. I couldn't agree more with the partner versus vendor analogy. And then when you were talking about the apples, a lot of times I think about like the subway sandwich and like there's the commercial of the subway sandwich. And then there's the experience of going to subway, which are sometimes drastically different. I want to switch gears and I read something recently where achievement, result oriented folks, people that are real drivers have a hard time finding, creating, enjoying outside interests like hobbies. They'll say it's a waste of time. I personally couldn't disagree more outside of work and family for you. What gets your engine ready? I would say cars have always been my escape and I would say that I try to get on track when I can. There's something really special about taking a car that you really enjoy on a race track. And the level of focus that that demands of you, it really just clears your head completely and does what a hobby should do, which is really almost like in a meditative state, really be able to take you away from all your stresses. And that's really been probably my go to hobby that I enjoy the most. However, as I got older, I know some more risk averse now. So I'm doing less of that. And more I would say spirited drives. I enjoy sometimes just as much. And it really is just enjoying some of the beautiful roads outside the New York metro area. What's like your favorite car to drive and what's like what's one of your favorite rides? It would be a GT three up to bear mountain right outside New York would probably be a good mind cleanse and a great afternoon. Pete, we're taking the GT three to met life stadium. That's our ride. Let's talk real quick. Giants football. I think back to a conversation we had on this podcast with Rob Conrad. He played full back for the dolphins. He's a GP at alternate. And we both kind of agreed once you have the quarterback, once you have the coach and plays everything else just kind of settles in the way you'd like. And the Giants got the hot coach on the market as a dolphins fan. I'm jealous. Jackson dark. He's a shot in the arm. Right. So what can we expect from the Giants now that they have John Harba and Jackson dark for the foreseeable future. And we're not going on as far as excitement goes in the Giants right now and we deserve it because it's been tough having Harba was fantastic. If you take that and the excitement around that there's some real good prospects. Second year picks now that are great for the team and some people are coming back and real excited about seeing the team next year. However, there's a couple things about the Giants that are really important going down every time they've been successful and had a super bowl season. They've been an underdog. So that's what makes them super exciting and just a valid that further we're talking about a team that is 413 right last in the NSE East. And it's really only up till from here right so it's going to be a better year convinced and also let's look at the past. I mean the past were 413 last year look where they are now. So if that doesn't give you hope I don't know what does. Pete you deserve it I can't wait till the day that I get to deserve it this has been hiscopalist founder of pet your funds group he's a car guy he's a Giants super fan and until next time we're together on fanatics forever thank you and take care.